Rakon (NZX:RAK): Is the Company on track for record full year ahead?

Highlights

• Rakon delivered revenue growth and increased net profit in FY21, majorly due to growth in the telecom sector.
• Rakon grew its underlying EBITDA by 132% to $26.4 in H1 FY22.
• The Group has projected an EBITDA between $44 million and $49 million for the year ended March 2022.

Rakon Limited (NZX:RAK) is recognised worldwide for its frequency control products providing timing and synchronisation solutions for equipment in the telecommunications, space and defence sectors.

The Group registered net profit, revenue growth and underlying EBITDA, majorly from growth in the telecom sector in FY21. RAK saw increased demand from telecom customers in the latter part of H1 of 2021 and responded to TCXO shortage globally in H2 of the year.

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The Group had projected its underlying EBITDA between $27 million and $32 million for FY22 in April.

Rakon’s Chairman stated in its annual meeting 2021 that the Group was tracking towards the top end of the guidance range. However, the same could be impacted due to substantial global shortages and increased lead times for inventory.

Financial performance in H1 FY22

Rakon grew its underlying EBITDA by 132% to $26.4 million and revenue by 43% to $85.4 million for the six months ended 30 September 2021. The Company benefitted from the persistent demand worldwide for its solutions.

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The Group has projected an EBITDA between $44 million and $49 million for the year ended March 2022. The increased forecast came on the back of expectations of further growth for the remaining FY22.

Road Ahead

Rakon has made an investment of $6.5 million in R&D in H1 FY22 for more innovation.

The Group also attained a breakthrough in delivering new TCXO products created particularly in response to global chip scarcities. It remains in a solid financial position with total assets increasing to $177 million and a boost in earnings provision to 18% in equity.

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Rakon plans to pursue a conservative strategy to handle its balance sheet as it prepares to support more growth prospects and manage supply chain risks, inflation and COVID-19.

The Group’s orders stay in place to post further growth in revenue for the remaining FY22, majorly in the 5G telecom network and the final tranche of orders due to global TCXO chip scarcity.

Rakon is likely to do well, given that it will be able to manage COVID-19-induced challenges and difficulties in obtaining raw materials and parts to fulfil orders.

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On 31 December, at the time of writing, RAK was trading at $2.08, up 1.96%.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)